There have been two important developments at the two most powerful central banks in the past two months. First, noises from the Fed officials on QE2 – aka round two of credit/quantitative easing – have caused renewed concern about balance sheet expansion and debt monetization in the US. At the same time, the ECB has […]
Implied US swaption vols are being CRUSHED. I have attached 2 charts – one for 5y5y and another for 6m10y implied normalized US swaption volatility. Vega, the 5y5y implied, is at its lowest level in over a year. Gamma, the 6m10y implied, is close to the March 2010 low. If we take out those March […]
Seven trading sessions ago 10yr yields were below 2.90% and the spoo was looking set to break 1000. I was stomping floor last week trying to convince people that “the economic reality of a 2.50% 10 year note” was a fantasy world! That said, I have been negative on bonds for the last 50bps, but […]
And had basically been delisted This headline just came across: (BN) *GERMANY’S HYPO REAL ESTATE SAID TO FAIL EU BANKING STRESS TEST It’s kinda like saying FNM, FRE, AIG, LEH or BSC failed the US stress test. Kinda seems obvious! If HRX had passed, now that would be some interesting news! You are unauthorized to […]
I thought that sticking with a South Park theme for commentary titles seemed appropriate given yesterday’s title – “And…its gone”. The chance to sell 2 handles in 10s is still gone and we are pushing up towards some key technical levels around 3.06. The rocking employment data from Canada today gave us a nice push […]
The chance to sell 3 handles in 10s has just disappeared. I remain steadfast in my pessimistic view of the long end of the US bond market! In any case I was once again shocked by the ECB today (this is getting old). So I was imagining that the fed funds rate had shot up […]
A few focus points this morning. First, the ECB continues to be a thorn in the side of global markets by failing to realize it is feeding a debt/deflation spiral in southern Europe. The latest weekly liquidity drain to sterilize purchases came at a whopping 56bps. This was after pressuring many banks to offer funds […]
Global fiscal austerity fears and disappointment on the US data front have us flirting with some steamy levels in US Treasuries. Those portfolio managers buying long end Treasuries at these levels in hopes of a rally should seriously consider the economic outlook they are banking on! For some help with this, I have outlined below […]
With 10s at 2.95% we are a mere 90bps from the “end of the world” lows in 2008/09. At that time the entire financial system was broken, global trade had halted, the payment system was on the brink of collapse, growth in emerging Asia was falling at 20%+ rates, the ISM was at 37, we […]
In the last 9 days, 10 year UST yields have fallen 40bps and spoos are down nearly 10%. Both are now at lows for the year. Certainly that was not how I saw Q2 ending, and frankly I remain stumped by the magnitude of the moves. Have the facts in the last 2 weeks changed […]